Have you heard of "cash flow banking?"

[SavinMaven]

Just heard this phrase for the first time today. Apparently it's similar in concept to a CD ladder, but uses pooled whole life insurance to supposedly generate 4-5% a year without risk or loss of liquidity. There's got to be a catch... and of course as soon as I hear "whole life" I'm likely to barf, then run for the hills.

Does anyone understand this process? Is it the idiot tax it sounds like it could be?

[scottish]

Whole life insurance is generally a low value product.    Avoid anything to do with whole life insurance.

[Freedomin5]

This article seems to explain it quite well:

https://paradigmlife.net/blog/cash-flow-banking/

Looks like you’re simply borrowing against the cash value of your whole life policy.

[phildonnia]

I've heard of this kind of thing before, usually on talk-radio advertisements. 

It's very difficult to figure out exactly what it is, since the web pages describing the concept are full of generalities and psychological appeals rather than any information about the "investment".  That right there is a big warning flag.

As far as I can tell, it seems like some kind of whole-life insurance policy where they pay you the cash value earlier.  The only thing that you can say about such schemes is that they may guarantee the yield.  That yield is necessarily going to be lower than the average you'd get from standard investing.

[Arbitrage]

I don't know the details, and frankly I don't need to know the details.  It's another confusing product being peddled by salesmen.  Why is the salesperson selling it?  Because it earns him/her a commission.  Assuming it's like all other permanent life insurance products, it earns him/her a very very hefty commission.  Where does that commission come from?  You. 

They can put lipstick all over their various pigs, but in the end the salesperson, and the insurance company, are earning a lot of money from you, and you could likely replicate whatever investments returns they claim to get in some form, without having to pay many thousands of dollars to someone else.

Buy insurance if you need insurance.  Buy investments if you want to invest.  Don't buy something you don't understand.

[Goldielocks]

It is insurance plus a savings or investment account.  Note that the fees for the insurance can be increased if the company starts to lose money...and will increase as you age, usually, like any insurance.
Only the investment side has a guarantee and at 4-5%, it is likely only guaranteed for an up front period.  If the market falls below 7% average returns, it is not feasible and rates will eventually be lower, or the insurance fees portion dramatically increase to make it up.